Expanding RTAs, Trade Flows, and the Multinational Enterprise

39 Pages Posted: 30 Mar 2008

See all articles by Michele U. Fratianni

Michele U. Fratianni

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Universita' Politecnica delle Marche

Chang Hoon Oh

Simon Fraser University (SFU) - Beedie School of Business

Abstract

We test the relationship between the size of regional trade agreements (RTA) and openness by using a gravity equation with multilateral trade factors. Our sample includes eleven RTAs, seven with constant membership and four with expanding membership. Regional trade bias declines with the size of the club; three of the four expanding RTAs have already surpassed their 'optimal' size. We also explore the link between openness of the RTA and the geographic strategy of the multinational enterprise. We find strong evidence in favor of the regionalization strategy, which has been enhanced by the presence of RTAs.

Keywords: Trade Blocks, Regional Integration, Multinational Enterprises (MNEs), Plurilateral RTAs, Trade Creation, Trade Diversion

JEL Classification: F13

Suggested Citation

Fratianni, Michele and Oh, Chang Hoon, Expanding RTAs, Trade Flows, and the Multinational Enterprise. Available at SSRN: https://ssrn.com/abstract=1114607 or http://dx.doi.org/10.2139/ssrn.1114607

Michele Fratianni (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-3360 (Phone)
812-855-3354 (Fax)

Universita' Politecnica delle Marche ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
39-071-2207120 (Phone)

Chang Hoon Oh

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

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